Category: Law
Did Ottoman Sultans ban print?
Did printing transform the Ottoman Empire? And what took the Ottomans so long to print? Much of the scholarship surrounding the topic of Ottoman printing, or the occurrence of printing within the Ottoman Empire (1453–1922), is structured around these two related frameworks. In this essay, I argue that these frameworks are ahistorical because they predicate Ottoman printing on the European experience of print. To support this point, I examine the disproportionate role played by certain early modern European accounts of Ottoman printing within Western and Arabic historiography. In particular, I examine the life cycle of scholars’ belief that Ottoman sultans banned printing, which I contrast with extant documentation for the imperial Porte’s stance on printing. I argue that the sources available to scholars today do not support the notion that the sultans banned printing. Rather, they demonstrate that this claim arose from early modern European scholars’ search to articulate their sense of Ottoman inadequacy through explanations for why Ottomans did not print. The history of this particular line of inquiry is significant, I argue, because many scholars continue to probe the issue of why Ottomans did not print. In so doing, they maintain the expectation that print would revolutionize society, even though they have begun questioning the existence of the ban.
That is from Kathryn A. Schwartz, in Print History (jstor). Via Benedikt A.
Peltzman Revisited
Casey Mulligan has an excellent new paper, Peltzman Revisited: Quantifying 21st-Century Opportunity Costs of Food and Drug Administration Regulation. What are the costs of delaying a new drug or a vaccine? Longer and bigger clinical trials increase safety but I’ve often made the point that the people who would have lived had a good drug been approved sooner are buried in an invisible graveyard and thus these costs are typically undercounted–the failure to see the invisible graveyard biases decisions in favor of delay. Mulligan makes a different and rarely considered point about substitution effects. If a vaccine isn’t available there are substitutes but these substitutes are themselves potentially unsafe and ineffective. But who is testing the substitures?
Many of these substitute interventions, such as remote work, closing schools, and canceling normal medical appointments, are beyond the jurisdiction of the FDA and can be utilized without any attempt to demonstrate their safety or efficacy.
If the substitutes work, the costs of delay are reduced. The FDA, for example, is right to prioritize drugs for which there are few alternative treatments. But the standards for many vaccine or drug substitutes are completely different than those used to approve a vaccine:
Closing schools to in-person learning is an important example of a prevention activity that was available, was applied to tens of millions of children in the United States, and was outside the FDA’s jurisdiction…Obviously the FDA’s effectiveness standard for vaccines differs from the effectiveness standard (if any) that school districts applied in deciding to close schools.
Where were the randomized controlled trials for closing schools, shutting the parks and beaches, and delaying medical appointments? Thus, it’s quite possible that greater safety of vaccines comes at the expense of greater time under less safe and possibly unsafe substitutes. As Mulligan concludes:
Approval delays for pandemic tests and vaccines pushed tens of millions of individuals and businesses into preventions and treatments that were both outside FDA jurisdiction and hardly safe or effective. The pandemic experience raises the question of whether, on the whole, consumers engage in more unsafe and ineffective practices than they would if FDA approval were not a prerequisite for pharmaceutical sales.
Addendum: Much else of interest in the paper including a calculation of the value of the vaccines in the hundreds of billions and trillions very much in line with work done by the AHT team, including myself ,in the AER PP (especially the appendix) and Science.
The California marginal tax rate schedule, benefits included
Friends, colleagues, may I present to you: the California Marginal Tax Rate Schedule pic.twitter.com/bYaHz8giIH
— Max Ghenis (@MaxGhenis) March 21, 2023
Via Jason Crawford.
The Government Conspiracy Against Crypto
A sharply worded whitepaper from law firm Cooper and Kirk accuses regulators at the FDIC and the FED of an illegal and unconstitutional attack on crypto done without cover of law or Congressional approval. Cooper and Kirk are one of the most powerful and influential law firms in Washington. The firm’s attorneys have frequently appeared before the Supreme Court and as of 2021 “six former interns or associates of Cooper & Kirk [were] serving as U.S. Supreme Court clerks.” So this broadside isn’t coming from an obscure and unconnected law firm:
Recent stories in the financial press have uncovered a coordinated campaign by prudential bank regulators to drive crypto businesses out of the financial system. Bank regulators have published informal guidance documents that single out cryptocurrency and cryptocurrency customers as a risk to the banking system. Businesses in the cryptocurrency marketplace are losing their bank accounts, or their access to the ACH network, suddenly, and with no explanation from their bankers. The owners and employees of cryptocurrency firms are even having their personal accounts closed without explanation. And over the past two weeks, federal regulators have shut down a solvent bank that was known to be serving the crypto industry and, although it is required to resolve banks through the “least cost resolution” to the Deposit Insurance Fund, the FDIC chose to shutter rather than sell the part of the bank that serves digital asset customers, costing the Fund billions of dollars.
This pattern of events is not random, and we have seen it before. This is not the first time that federal bank regulators, working with their State-level counterparts, have abused their supervisory authority to label businesses unworthy of having a bank account and worked in secret to purge disfavored lines of commerce from the financial system. Beginning in 2012, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System carried out a coordinated campaign to weaponize the banks against industries that had fallen out of favor with the administration—including gun stores, pawn shops, tobacco stores, payday lenders, and a host of other brick and mortar businesses. That campaign was called Operation Choke Point.
Our firm successfully challenged Operation Choke Point, and it was brought to a halt. The current bout of regulatory overreach against the crypto industry is illegal for much the same as reason as its predecessor. Specifically:
• Operation Choke Point 2.0 deprives business of their constitutional rights to due process in violation of the Fifth Amendment. It is well settled that when a federal agency attaches a derogatory label to an individual or business, and this stigmatizing label causes the business to lose a bank account or broadly precludes them from the pursuit of their chosen trade, the agency has violated the Due Process Clause of the Fifth Amendment, unless if first afforded the individual or business a right to be heard. This is precisely what the federal bank regulators responsible for Operation Choke Point 2.0 have done and continue to do by labeling crypto businesses a threat to the financial system, a source of fraud and misinformation, and a risk to bank liquidity.
• Operation Choke Point 2.0 violates both the non-delegation doctrine and the anticommandeering doctrine, depriving Americans of key structural constitutional protections against the arbitrary exercise of governmental power.
• By leveraging their authority over the banks to acquire the power to pick and choose the customers whom the banks may serve, the bank regulators have exceeded their statutory authority. The bank regulators are charged with supervising the safety and soundness of the banks; their effort to anoint themselves the gatekeepers of the financial system and the ultimate arbiters of American innovation and American economic life cannot be permitted to stand.
• The federal bank regulators are also refusing to perform their non-discretionary duties when doing so will benefit the cryptocurrency industry. State banks that are statutorily entitled to access the federal reserve system are being denied their rights solely because they serve the crypto industry. The federal bank regulators are not free to pick and choose which statutory obligations they duties they wish to perform.
• The federal bank regulators are evading the notice and comment rulemaking requirements of the administrative procedure act by imposing binding requirements on the banking industry through informal guidance documents. This is undemocratic, since it deprives the public of the right to comment on proposed rules, and it also runs contrary to the principle of judicial review, since courts lack the power to review “informal” agency actions.
• Finally, the federal bank regulators are acting in an arbitrary and capricious fashion by failing to adequately explain their decisions, by failing to engage in reasoned decision making, and by failing to treat like cases alike. It is difficult to imagine a more arbitrary and capricious agency action than simultaneously placing a solvent bank into receivership solely because it provided financial services to the crypto industry, while permitting insolvent institutions not tied to the crypto industry to continue operating.
…The persistent unwillingness of the nation’s bank regulators to follow the law and obey the Constitution calls out for Congressional action. Cracks are starting to form in the American financial system as its regulators increasingly abuse their power to achieve aims outside their authority and beyond their competence….We therefore urge Congress to perform its oversight role and hold these agencies to account.
I agree that financial regulation has been employed unconstitutionally, illegally, and covertly to control and regulate economic activity. One of my big fears is that a Central Bank Digital Currency would render nearly every transaction in the entire economy legible and primed for government monitoring and control. Thus, it is crucial to uncover, understand and debate the clandestine nature of financial regulation before the urgency of crisis is used to push us into an undesirable new equilibrium that will be difficult to escape.
Read the whole thing.
Regulation Can’t Prevent the Next Financial Crisis
That is the topic of my latest Bloomberg column, here is one piece of it:
For another, an effort to make banks safer can effectively push risk into other sectors of finance. It can move into money market funds, commercial credit lenders, fintech, insurance companies, trade credit, and elsewhere. These institutions are generally less regulated than are banks and don’t have the same kind of direct access to the Federal Reserve’s discount window.
This is no mere hypothetical: In the 2008 crisis there were major problems with both money market funds and insurance companies.
There is a temptation, in light of recent events, to greatly stiffen bank capital requirements — to raise them to, say, 40%. Again, that would make banks safer, but it would not necessarily make the financial system as a whole safer.
And so policymakers allow banks to continue along their potentially precarious path. Whatever their reasons, the fact remains that bank regulations can get only so tough before financial risk starts spreading to other, possibly more dangerous, corners of the system.
And:
During the 2008 financial crisis, for example, there was an excess concentration of derivatives activity in AIG, later necessitating a bailout. Financial derivatives acquired a bad name in many quarters, and government securities were viewed as a safe haven. With Silicon Valley Bank, the problem was the inverse: Its portfolio was insufficiently hedged with derivatives and interest-rate swaps, leaving it vulnerable to major swings in interest rates. It should have used derivatives more.
It is easy enough to say, “We can write regulations so this won’t happen again.” But those regulations won’t prevent new kinds of mistakes from happening.
Côte d’Ivoire claim of the day
Côte d’Ivoire citizens pay the highest income taxes in the world according to this year’s survey findings by World Population Review.
While both its sales and corporate tax regimes may be considerably lower than those of other countries globally, at 60%, Côte d’Ivoire’s income tax rates are markedly higher compared to developed countries.
Only Finland (56.95%), Japan (55.97%), Denmark (55.90%), and Austria (55%), closely follow Côte d’Ivoire to round up the top five countries with the highest income tax, in a study that surveyed over 150 countries.
How much people pay of course is yet another matter. Here is the link, via Jodi Ettenberg.
Regulatory sentences to ponder
The SEC allowed Coinbase to go public in 2021, he [Brian Armstrong] wrote, including after reviewing its disclosures that “clearly explained our asset listing process and included 57 references to staking.”
Here is the full WSJ article. Rule of law people, or “rule of men” (and women)? Which is it?
Here is the full Brian Armstrong tweet storm.
My podcast with Bari Weiss, she interviews me
Titled “Bank runs, crypto scams, and world-transforming AI,” plus a round of overrated vs. underrated, among other topics, including inflation.
Lots of fun, I feel Bari and I always have very good energy together…
Chat Law Goes Global
PricewaterhouseCoopers (PWC), the global business services firm, has signed a deal with OpenAI for access to “Harvey”, OpenAI’s Chatbot for legal services.
Reuters: PricewaterhouseCoopers said Wednesday that it will give 4,000 of its legal professionals access to an artificial intelligence platform, becoming the latest firm to introduce generative AI technology for legal work.
PwC said it partnered with AI startup Harvey for an initial 12-month contract, which the accounting and consulting firm said will help lawyers with contract analysis, regulatory compliance work, due diligence and other legal advisory and consulting services.
PwC said it will also determine ways for tax professionals to use the technology.
IBM’s Watson was a failure so we will see but, yeah I will say it, this time feels different. For one, lawyers deal with text where GPTs excel. Second, GPTs have already revolutionized software coding and unlike Watson I am using GPTs every day for writing and researching and it works. The entire world of white collar work is going to be transformed over the next year. See also my paper with Tyler, How to Learn and Teach Economics with Large Language Models, Including GPT.
What do I think of the economists’ Israel petition?
It is signed by many luminaries, and it opens with this:
The governing coalition in Israel is considering an array of legislative acts that would weaken the independence of the judiciary and its power to constrain governmental actions. Numerous Israeli economists, in an open letter that some of us joined, expressed concerns that such a reform would adversely affect the Israeli economy by weakening the rule of law and thereby moving Israel in the direction of Hungary and Poland. Although we significantly vary in our views on public policy and on the challenges facing Israeli society, we all share these concerns. A strong and independent judiciary is a critical part of a system of checks and balances. Undermining it would be detrimental not only to democracy but also to economic prosperity and growth.
I would say I haven’t made up my mind on the substantive issue, as I have seen credible (not saying they are true, I don’t know) arguments that the current Israeli judiciary has too much power. The proposed reforms still might be a badly timed and significant overreach, but my intuition is that the arguments are more complicated than this petition is making them out to be. As economists, are they not at least obliged to tell us what the relevant trade-off is?
I also wonder if these outside voices have influence in Israeli politics, or whether they might occasion backlash. Again, I don’t know, but I do see an argument for reserving collective petitions for very clear cut cases when the transmitted signal will be positive. Is the binding constraint here “not having enough elite academic foreigners in opposition to Netanyahu”?
More generally and perhaps most importantly, will this petition be effective? Many kinds of petitions should be saved up for when they will change something. If they are not going to matter, in essence the signers are signaling their weakness rather than their strength. They are spending down their reputational capital, rather than building it up. And in those cases, why have the petition at all?
UK to Adopt Pharmaceutical Reciprocity!
More than twenty years ago I wrote:
If the United States and, say, Great Britain had drug-approval reciprocity, then drugs approved in Britain would gain immediate approval in the United States, and drugs approved in the United States would gain immediate approval in Great Britain. Some countries such as Australia and New Zealand already take into account U.S. approvals when making their own approval decisions. The U.S. government should establish reciprocity with countries that have a proven record of approving safe drugs—including most west European countries, Canada, Japan, and Australia. Such an arrangement would reduce delay and eliminate duplication and wasted resources. By relieving itself of having to review drugs already approved in partner countries, the FDA could review and investigate NDAs more quickly and thoroughly.
Well, it’s happening! After Brexit, there were concerns that drugs would take longer to get approved in the UK because the EU was a much larger market. To address this, the UK introduced the “reliance procedure” which recognized the EU as a stringent regulator and guaranteed approval in the UK within 67 days for any drug approved in the EU. The Reliance Procedure essentially kept the UK in the pre-Brexit situation, and was supposed to be temporary. However, recognizing the logic of recognizing the EU, the UK is now saying that it will recognize other countries.
Our aim is to extend the countries whose assessments we will take account of, increasing routes to market in the UK. We will communicate who these additional regulators are and publish detailed guidance about this new framework in due course, including any transition arrangements for applications received under existing frameworks.
The UK is already participating in a mutual recognition agreement with the FDA over some cancer drugs. Therefore, it seems likely that the FDA will be among the regulatory authorities that the UK recognizes. If the UK does recognize the FDA, then we only need the FDA to recognize the UK for my scenario from more than 20 years ago to be fulfilled.
It’s thus time to revisit the Lee-Cruz bill of 2015, which proposed the Result Act (I was an influence).
Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” which would amend the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs.
Addendum: Many previous posts on FDA reciprocity.
Sentences to ponder
Big banks’ behavior this time has been shaped by the fallout from 2008. Why isn’t Dimon buying S.V.B.? He has complained about the headaches of buying Bear Stearns and Washington Mutual at the government’s behest in 2008, having spent years fighting litigation and paying fines for those firms’ bad behavior. Bank executives who were around back then remember that.
That is from Dealbook 2.0, NYT, via TO. File under “The Costs of Intervention and Regulation and Political Grandstanding are Higher than You Think.”
Can the SVB crisis be solved in the longer run?
The failure and closure of Silicon Valley Bank (SVB) raise immediate issues as to how policymakers should react. I’d like to step back and consider what this implies for banking regulation more generally in the longer run. The main lesson is that successful bank regulation is an ongoing, dynamic problem, unintended secondary consequences are rife, and neither more regulation or less regulation can be guaranteed to succeed.
If you think of the FDIC/Fed/Treasury as a consolidated entity, the broader question is how many financial institution liabilities they should guarantee, whether explicitly or implicitly. Let us consider why in fact the government felt compelled to guarantee all of the deposits.
An unwillingness to guarantee all the deposits would satisfy the desire to penalize businesses and banks for their mistakes, limit moral hazard, and limit the fiscal liabilities of the public sector. Those are common goals in these debates. Nonetheless unintended secondary consequences kick in, and the final results of that policy may not be as intended.
Once depositors are allowed to take losses, both individuals and institutions will adjust their deposit behavior, and they probably would do so relatively quickly. Smaller banks would receive many fewer deposits, and the giant “too big to fail” banks, such as JP Morgan, would receive many more deposits. Many people know that if depositors at an institution such as JP Morgan were allowed to take losses above 250k, the economy would come crashing down. The federal government would in some manner intervene – whether we like it or not – and depositors at the biggest banks would be protected.
In essence, we would end up centralizing much of our American and foreign capital in our “too big to fail” banks. That would make them all the more too big to fail. It also might boost financial sector concentration in undesirable ways.
To see the perversity of the actual result, we started off wanting to punish banks and depositors for their mistakes. We end up in a world where it is much harder to punish banks and depositors for their mistakes.
Another unintended secondary consequence is that lots of funds would flow out of the banking system and into U.S. Treasuries. In other words, our private businesses would find it harder to borrow and our government would find it easier to borrow and thus government would command more resources. That hardly seems like a desirable outcome for a policy decision that had some initially libertarian motives.
Alternatively, you might think it is a simple way out for the government to guarantee all those deposits, as indeed was done last evening.
That decision too will prove to have unintended secondary consequences. Raising the FDIC protection limit from $250,000 to ??? raises political eyebrows in a dramatic manner. For one thing, the FDIC would then be seen as guaranteeing a much larger part of the financial system. Over time, the pressures for the government to protect yet additional parts of the financial system will grow, just as they did after the bailouts from the 2008-2009 financial crisis. Furthermore, if the FDIC keeps on increasing its protections in the quest for financial stability, that means a larger FDIC, a larger regulatory apparatus, perhaps higher capital requirements, and over time higher premia for banks to pay to the FDIC. (As a side note, worthy of another post, we are also hearing calls that somehow VCs need to be regulated now, if they are going to “receive bailouts”.)
As that scenario unfolds, there will be all the more incentives to supply more lending and also deposit-taking services outside the formal and more heavily regulated banking sector. Rather than pushing more resources into the larger banks, this policy would push additional resources outside the formal banking system altogether. That would mean less power, oversight and scrutiny from the Fed and also from other regulatory bodies. Typically American banks are more tightly regulated and monitored than are non-bank financial entities.
This kind of problem is likely to unfold slowly, but it is no less real. The initial policy was an expansion of FDIC regulatory authority, but the end result could well be less total regulation of lending and depository functions. Once again, the policy decision may fail at achieving its initially intended goals.
The core problem is this: regulators can only protect so much of the financial system. Yet in a wealthy, peaceful economy the financial system often grows more rapidly than does gdp, if only because the financial system is based on the intermediation of wealth, not income. Simple accumulation boosts the ratio of wealth to income over time, thereby creating regulatory dilemmas for finance. Neither “regulating more and more of it” nor “letting more and more of it continue in a less regulated manner” are entirely satisfactory solutions.
But those of course are the only options available to us.
“Authorities Reinstate Alcohol Ban for Aboriginal Australians”
Geoff Shaw cracked open a beer, savoring the simple freedom of having a drink on his porch on a sweltering Saturday morning in mid-February in Australia’s remote Northern Territory.
“For 15 years, I couldn’t buy a beer,” said Mr. Shaw, a 77-year-old Aboriginal elder in Alice Springs, the territory’s third-largest town. “I’m a Vietnam veteran, and I couldn’t even buy a beer.”
Mr. Shaw lives in what the government has deemed a “prescribed area,” an Aboriginal town camp where from 2007 until last year it was illegal to possess alcohol, part of a set of extraordinary race-based interventions into the lives of Indigenous Australians.
Last July, the Northern Territory let the alcohol ban expire for hundreds of Aboriginal communities, calling it racist. But little had been done in the intervening years to address the communities’ severe underlying disadvantage. Once alcohol flowed again, there was an explosion of crime in Alice Springs widely attributed to Aboriginal people.
Here is more from Yan Zhuang at the New York Times. Via Rich Dewey.
Restrictions on state public health authorities
Conservative and libertarian forces have defanged much of the nation’s public health system through legislation and litigation as the world staggers into the fourth year of covid.
At least 30 states, nearly all led by Republican legislatures, have passed laws since 2020 that limit public health authority, according to a Washington Post analysis of laws collected by Kaiser Health News and the Associated Press as well as the Association of State and Territorial Health Officials and the Center for Public Health Law Research at Temple University.
Health officials and governors in more than half the country are now restricted from issuing mask mandates, school closures, and other protective measures or must seek permission from their state legislatures before renewing emergency orders, the analysis showed.
Here is more from the Washington Post.